Happy holidays!  As the year comes to an end, I wanted to share five of the most popular articles, podcasts, and videos we created in 2019.  I hope followers found our content helpful in 2019, and, as always, if you have any suggestions for topics or areas to discuss in 2020, please let us know.  Here is the five most popular articles, podcasts, and videos from 2019:

1. Article: Salary increases required for exempt employees in 2019

To qualify as an exempt employee, California requires that an employee must be “primarily engaged in the duties that meet the test of the exemption” and “earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” Labor Code section 515.  As of January 1, 2019, the minimum wage in California increased from $11.00 to $12.00 per hour for employers with 26 or more employees (the increase is from $10.50 per hour to $11.00 per hour for employers with 25 or fewer employees on January 1, 2019).  With the increase in the state minimum wage, there is a corresponding raise in the minimum salary required to qualify as exempt under the “white collar” exemptions.

2. Podcast interview with Andrea Borgen

In this podcast I had a discussion with Andrea Borgen, owner of Barcito, an all-day cafe and late-night bar in downtown Los Angeles. It was a fascinating discussion of various topics including legal updates for California employers and how to manage your own business.

3. Podcast: 5 Key Issues for Terminations in California

Not surprising that California employers are always interested in learning more on how to conduct a termination in a way that reduces potential liability.

4. Video: Bill AB 5 Passed: How will it impact independent contractors in California?

AB 5 is changing the landscape of work in California.  It will be interesting to see how industries and the gig economy adapt or if challenges to the law will be successful over the coming year.

5. Video: Top Employment Issues Facing the Hospitality Industry

The hospitality industry is facing many obstacles. Issues such as minimum wage, predictive scheduling mandates, paid sick leave requirements, joint employer issues, and employee required training increase the costs of operations.  Many restaurants are looking to automation to help minimize some of the costs.

Wishing you the best over the holidays!

I’ve been thinking a lot recently about whether entrepreneurs are born or if they are made over time.  I enjoy working with entrepreneurs; I love their spirit, drive, and persistence, even when the odds are stacked against them.  The perennial question will likely be debated for many years to come, but here are five qualities that I believe make a successful entrepreneur/business founder:

1. They don’t do it for the status.

A restaurant client of mine opened a new restaurant a few years ago and invited friends and family to the soft opening.  You would think that this would be a great time for the operator to celebrate his success and meet with the people attending the event, right?  He was one of the first people I saw walking up to the restaurant because he was in the parking lot picking up trash.  I’ve changed this story a bit to protect the identity of my client – but the essence is true – this successful entrepreneur was picking up garbage to ensure customers had a great first experience.

If an entrepreneur is doing it for the status, they will not do the dirty work, put in the long hours, or have the push that is required to have a chance at success.  Entrepreneurs understand they must do everything in their company – even pick up trash during the launch.

2. They can rely upon and follow their own instinct.

There are many different stats on the failure rate of startups – but the often cited percentage is that 90% fail.  Also, only 25% of small businesses will employ more than just the founder.  Entrepreneurs are confident in their own decisions and have the fortitude to be held accountable for their decisions.  It is a difficult lifestyle (often not discussed, but getting more attention recently) that can be very lonely.  In the likely event that the startup fails, the entrepreneur must be comfortable with the contacts, friends and family members who will criticize the entrepreneur’s attempt as being foolish.  But if the company succeeds, these same critics will be the first ones who would say that they always knew the entrepreneur “had it in them.”  Entrepreneurs don’t internalize the shame or the accolades, and they continue on following their own instincts.

3. They select great teams to rely upon.

Entrepreneurs have a great EQ and cultivate the people around them and on their team.  At first, when the company cannot afford other employees and executives, it is critical that they have friends and family that they can trust to receive honest feedback.  As the company grows, these positions are filled with other executives selected by the entrepreneur.  As Gary Vaynerchuk points out, “The higher you climb and the more the business grows, the stakes become a lot bigger. More and more people are depending on you to make the right decisions for them and the company. The league you’re playing in and the skill set required jumps from pickup ball to NBA very quickly.”  It is critical that the entrepreneur has skilled teammates.

4. They are comfortable with uncertainty.

One trait that I believe is essential for an entrepreneurs is the ability to be comfortable with uncertainty.  It may even extend beyond uncertainty, to include the ability to be comfortable with risk.  A lot of people who claim they are a start-up founder say they like the risk, but let’s face it, once there is a major setback or the company fails, most people go get another job.

5. They are realistic, but don’t let the status quo set their reality.

Yes, there are many obstacles facing the entrepreneur, and yes, no one has done this before, but the entrepreneur sees potential opportunities where others have not.  This takes a very refined skill of understanding reality, while also being opportunistic, just enough to see something that others have not seen before.  For Bill Gates and Paul Allen, this was the insight that PC’s would become a fixture in every business and house, when the companies that dominated the field, such as IBM, were certain that mainframe computers were the future.  For Jeff Bezos, it was the insight that he could take an on-line book sales company to become a company that could sell everything to everyone.

Are these qualities in a person’s DNA or are they learned over time?  I believe it is a bit of both – some natural tendencies in combination with hard work that can ultimately lead to a successful business.

Article by: Michael Thompson

On the Tuesday before Thanksgiving, a Los Angeles jury hit billionaire Alki David and two of his media companies, FilmOn and Alki David Productions, with an $8.25 million verdict on claims of battery, sexual battery, and sexual harassment brought by Mahim Khan, a former employee. After turkey and stuffing, the jury returned the next Monday, deliberated for one hour, and awarded Khan $50 million in punitive damages against David.

The case featured lurid allegations and was punctuated by shocking courtroom antics from David, but there are lessons that employers big and small can learn and apply to manage risk and address sexual harassment claims.

1. Get a Lawyer

David chose to act as his own lawyer at trial. But after he made numerous procedural missteps on the first day of trial, the court revoked his right to act as his own attorney. He never retained an attorney, and thus was unrepresented (and frequently absent) through most of the trial.

Now, most people would know to get a lawyer long before trial, but you don’t have to wait until you are served with a court summons to call up your employment counsel. Pre-litigation legal advice can help you make informed, strategic decisions that have enormous implications in court. A great trial lawyer may be able to explain away a problematic email to the jury, but an experienced attorney can make recommendations that may keep you out of the courtroom altogether.

So don’t hesitate to calling your lawyer when you receive that threatening demand letter. Or when the employee requests a copy of her personnel file. Or when you are thinking about terminating an employee who previously made a complaint to HR. Or when you get that note about something that happened at the company holiday party.

2. Individuals Can Be Personally Liable For Harassment

Take note that David was held personally liable for the $50 million punitive damages verdict, in addition to being jointly liable with his companies for the $8.25 compensatory award. In California, supervisors and coworkers can be held personally liable for harassment that they perpetrate. And while your employer may pay for your defense, any damages awarded against you are likely not insurable.

3. Consider the Stakes

The chances you will ever face a multi-million dollar verdict are (hopefully) remote. But that hefty price tag can obscure the very real costs and liability any employer could face. Many claims that employees bring, including sexual harassment under California’s Fair Employment and Housing Act, entitle prevailing employees (but frequently not prevailing employers) to recover attorney’s fees and court costs. Thus, you can expect the final judgment against David to be even higher than $58.25 million.

Beyond that, an employer has to retain attorneys to defend the lawsuit. Although certain insurance policies, such as EPLI, may cover the cost of defense, these policies frequently require the insured to cover some amount as a retention or deductible. Moreover, insurers consider past claims when determining the insurance premium to charge.

The point? An ounce of prevention is worth a pound of cure. Invest in your business by getting your employees trained on sexual harassment and other issues. (California law already requires most employers to provide two hours of sexual harassment training to supervisors and one hour to non-supervisors.) Develop written policies that inform your employees of expected standards of behavior and how they can report violations of those standards. Take complaints seriously and make sure they are timely investigated by someone (whether internally or externally) experienced and knowledgeable in conducting workplace investigations.

These steps may feel today like distractions and costs that are not tied to growing your business, but consider the $58.25 million-plus cost of not doing those things.

4. Harassment Can’t Be a Feature of Your Business

David’s companies produce extreme and graphic content, and the defendants argued that anyone who worked in the office had to expect an environment consistent with this product. David admitted to many antics, such as walking naked around the office, but attributed it to legitimate business interests of creativity. Do we think the jury bought that?

Again, this was an extreme case, but don’t assume that a jury will share your worldview on pranks and jokes in the workplace.

5. Give Mature Thought to Settlement

Trial can be unpredictable. Jury trials even more so. This was David’s fourth such trial this year. He suffered defeats of $5 million and $11 million in previous trials, but nearly won another trial where a jury reportedly split 8-4 in his favor. (A fifth trial and a retrial of that hung jury await.)  No two claims are exactly the same, but $0, $5 million, $11 million, and $58.25 million represents a wide range of outcomes.

David maintains his innocence, has vowed to continue fighting, and insists that he will never pay a penny of these verdicts. As a billionaire, he can likely afford to take that defiant stand, including appellate fees and the 10% interest that is likely to run on each judgment pending appeal.

Can your business afford that? We don’t know what amounts these plaintiffs demanded to settle with David, but employers are frequently faced with the prospect of paying way more than seems fair to settle claims, even seemingly frivolous claims. And sometimes settlement just isn’t possible because what the plaintiff wants is simply far beyond what is reasonable or possible.

But settlement represents a management of risk and cost. And those costs include time and attention. Khan sued David in March 2017. Even if an employer hires outside counsel, a lawsuit demands time and attention to respond to discovery requests, sit for depositions, and attend trial. Keep those costs in mind before you reject the prospect of early resolution.

6. Consider Arbitration

Khan v. David played out publicly in court and was covered daily by various publications. There was extensive coverage of the allegations and David’s various outbursts. Not ideal.

Private arbitration could have avoided this publicity. Additionally, many plaintiff’s counsel view juries as more sympathetic and likely to award outsized verdicts than arbitrators, and may value settlement accordingly. Give serious thought to whether arbitration agreements with your employees makes sense for your business.

Of course, you will want to talk with employment counsel about the downsides of arbitration, including the increased costs borne by the employer. And don’t forget the various changes to California law regarding arbitration coming into effect in 2020.

As 2019 comes to an end, it is a great time to audit employment policies and practices.  The next series of posts will be a review of a few practices California employers should review on a periodic basis.  Obviously, it is important to work with a qualified attorney to ensure compliance, but I wanted to highlight a few issues on these topics that employers can use to start a self-audit that then can be used to save time and money when reviewing with an attorney.

Five areas to audit regarding the hiring process in California:

1. Are applications seeking appropriate information?

2. Are new hires provided with required policies and notices?

3.  Are new hires provided and acknowledge recommended policies?

  • For example, many employers implement meal period waivers for shifts less than six hours.

4. Are hiring managers trained about the correct questions to ask during the interview?

5. Does the company provide new hires (and existing employees) with arbitration agreements?

  • California employers should review with an attorney if implementing arbitration agreements in their workforce given the U.S. Supreme Court’s ruling in May of 2018 upholding the use of arbitration agreements in the employment context.  My prior article on the U.S. Supreme Court’s ruling in Epic Systems Corp. v. Lewis is here.
  • For employers that have an arbitration agreement in place, the agreement needs to be updated to comply with AB 51 by January 1, 2020.  AB 51 prohibits employers from requiring any applicant for employment or any employee to waive any right, forum, or procedure under the California Fair Employment and Housing Act (FEHA) or the Labor Code as a condition of employment, continued employment, or the receipt of any employment-related benefit. AB 51 is California’s renewed attempt to outlaw the practice of employers requiring employees to submit to binding arbitration. Whether AB 51 is preempted by the Federal Arbitration Act is something to be monitored closely.

Happy Thanksgiving!  I hope everyone is getting some time to relax and enjoy some time with their families (and eat some great food).  Entering the holiday season, it is a good time to review employer’s obligations to accommodate requests for time off for holidays and best pay practices during holiday leaves.  This Friday’s Five covers five reminders for employers about holiday leaves and pay:

1. California employers are not required to provide employees time off for holidays.

There is no requirement that California employers provide time off (except for religious accommodations – see below) for holidays. California’s DLSE’s website states the following:

Hours worked on holidays, Saturdays, and Sundays are treated like hours worked on any other day of the week. California law does not require that an employer provide its employees with paid holidays, that it close its business on any holiday, or that employees be given the day off for any particular holiday.

2. California employers are not required to pay for time off for holidays, nor are they required to pay additional wages if employees work on holidays.

Likewise, there is no requirement that employers pay employees extra pay or “holiday pay” for work performed on holidays. Employers can voluntarily agree to pay employees extra pay for work that is required during holidays, but these terms would be governed by policy set forth by the employer. Therefore, employers are urged to make sure their holiday pay policies are clearly set forth.

California’s legislature has proposed bills that would require certain employers to pay employees double time for work done on Thanksgiving, but none of these bills have become law.  For example, the “Double Pay on the Holiday Act of 2016” proposed to require an employer to pay at least 2 times the regular rate of pay to employees at retail and grocery store establishments on Thanksgiving. None of these attempts by the legislature have been successful yet in requiring California employers to pay any extra “holiday pay.”

3. Employers must provide reasonable accommodations for employees who cannot work on certain holidays due to religious observances.

Employers need to be aware of any religious observances of their employees since employers need to provide reasonable accommodations for employees due to religious reasons. The analysis of reasonable accommodation is required is a case by case analysis based on the company’s type of business and the accommodation requested by the employee. If the employer’s operations require employees to work during normally recognized holidays, such as a restaurant, then this should be communicated to employees in the handbook or other policies and set the expectation that an essential function of the job requires work during normal holidays.

4. If an employer does pay for time off during holidays, the employer does not have to allow employees to accrue holiday paid time off.

If an employee leaves employment before the holiday arrives, the employer is not required to pay the employee for the day off.  But the employer’s policy regarding holiday pay must clearly set out that this benefit does not accrue to employees and that they must be employed during the specific holidays to receive the holiday pay.  Often the employer will also require that the employee works the days leading up to and following the holiday in order be eligible for the holiday pay.

5. If a pay day falls on certain holidays, and the employer is closed, the employer may process payroll on the next business day.

If an employer is closed on holidays listed in the California Government Code, then the employer may pay wages on the next business days.  The DLSE’s website explains this, and other considerations, for the timing requirements for payroll.  The holidays listed in the Government Code are as follows:

  • January 1 — New Year’s Day
  • Third Monday in January — Martin Luther King Jr. Day
  • February 12 — Lincoln’s Birthday
  • Third Monday in February — Washington’s Birthday
  • Last Monday in May — Memorial Day
  • July 4 — Independence Day
  • First Monday in September — Labor Day
  • Second Monday in October — Columbus Day
  • November 11 — Veterans Day
  • Fourth Thursday in November — Thanksgiving Day
  • Day after Thanksgiving
  • December 25 — Christmas
  • Other days appointed by the governor for a public fast, thanksgiving or holiday

The DLSE’s website provides the definition of “holiday” here.

In O’Grady v. Merchant Exchange Productions, Inc., the California Court of Appeals held that a mandatory service charge could potentially be found to be a gratuity that must be distributed to service employees.  The issue in the case is whether a “service charge” can be a “gratuity” that Labor Code section 351 requires to be distributed, only to non-managerial employees actually serving customers.

Plaintiff, Lauren O’Grady, is a banquet server and bartender at the Julia Morgan Ballroom in San Francisco, which is operated by defendant Merchant Exchange Productions.  Plaintiff brought this class action alleging that her and the other non-managerial service employees were entitled to the 21 percent “service charge” added to every banquet bill.  Plaintiff alleged that the service charge constituted a gratuity that should be distributed to the non-managerial service employees pursuant to section 351.

The complaint alleged that the way the service charge was presented to customers “ was reasonable for [the customers] to have believed they were gratuities to be paid to the service staff.  Indeed, because of the way these charges are depicted to customers, and the custom in the food and beverage industry that gratuities in the range of 18-22% are paid for food and beverage service, customers have paid these charges reasonably believing they were to be remitted to the service staff.”  Plaintiff alleged causes of action under the Unfair Competition Law (Business & Professions Code Section 17200), intentional interference with advantageous relations, breach of implied contract, and unjust enrichment.

1. Labor Code section 350 and 351 protects gratuities as property of the employee.

The court explained that tips are protected under California law, and “[t]he Legislature wanted to protect employees from employers who used their positions to unfairly command a share of the employee’s tip.”  (Chau v. Starbucks Corp., 174 Cal.App.4th 692, 696, 699 [“section 351 was enacted to prevent an employer from pressuring an employee to give the employer tips left for the employee.”].)  Section 350 defines “gratuity” to “include any tip, gratuity, money or part thereof that has been paid or given to or left to an employee by a patron of a business over and above the actual amount due the business for services rendered or for goods, food, drink, or articles sold or served to the patron.”

Section 351 provides that “No employer or agent shall collect, take or receive any gratuity or part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as part of the wages due the employee from the employer.”

2. The Court held that the term “service charge” can have different meanings.

The court also explained that the term “service charge” can have many different meanings, and “simply calling something a ‘service charge’ hardly ever explains what it is – or why it is being imposed.”  Therefore, the court held that at the early stage in this case, plaintiff had at least plead enough facts and a potential theory for recovery to continue with the lawsuit and avoid having it dismissed at this stage.

3. Prior holdings in Searle v. Wyndham International and Garcia v. Four Points Sheraton LAX.

Defendant argued that two cases, Searle v. Wyndham Internat. (2002) 102 Cal.App.4th 1327 and Garcia v. Four Points Sheraton LAX (2010) 188 Cal.App.4th 364, established a mandatory service charge which is automatically added to a customer’s bill and which a customer is required to pay is not a gratuity as a matter of law.

In Searle, a San Diego hotel charged a 17 percent service charge to every room service order, which was given to the server.  A customer sued complaining that the charge was deceptive because the guests were not informed that this service charge was given to the employee, and there was an additional line of the receipt for a tip.  The court in Searle held that this was not a deceptive practice.  Garcia involved a city ordinance for hotels near LAX “that in plain effect directed certain hotels to treat their mandatory service charges as owed ‘to workers who render the services for which the charges have been collected.’”  (Garcia, supra, 188 Cal.App.4th 364, 370.)  Both of these cases contain language that because service charges are mandatory, the employer can do what it wants to with the service charge.  Indeed, Garcia also clearly sets forth that “[a] gratuity is not a service charge…Thus, a service charge by definition is not a gratuity.  The Legislature has made clear that amounts due for services (which include service charges) are not gratuities.”  (Garcia, 188 Cal.App.4th 364, 377.)

4. The Court distinguished Searle and Garcia from the facts in this case.

In this case, the court distinguished the Searle and Garcia cases in finding that “[n]either Searle nor Garcia involved what we have here—an employee who alleges that what the ballroom customer meant for employees to have is being kept by the employer.”  The court ultimately held that “[n]either, or both together, should be read, as defendant does, as categorially establishing that what may be called a ‘service charge’ by an employer can never be a gratuity.”

The Court noted that in addition to private agreements (as was the case in Searle) or by legislative command (as in Garcia), plaintiff here is alleging that custom in the hospitality industry is to treat amounts designated as “service charges” as gratuities for employee.  The court stated, “In other words, custom or usage can serve as a common law augmentation of section 350 and 351.”

The court held that plaintiff’s theory that a mandatory service charge could potentially be considered a gratuity by the customer, and therefore property of the server, not the employer, could proceed given the uncertainty of what is meant when a customer pays a “service charge.”

5. California employers should clearly notify customers and employees about mandatory service charges.

Based on the holding in O’Grady, California employers should review their descriptions of mandatory service charges, and if the employer wishes to retain these amounts and does not distribute them to the service employees, this must be made clear to the customers and employees.  This can be done through various notices (such as on contracts with customers, menus, and receipts) that the mandatory service charge is not a gratuity or a tip that the server receives, but it is an amount retained by the company.

Being named as a defendant in a class action or Private Attorneys General Act (PAGA) lawsuit can be overwhelming, especially for a growing company. However, with planning, a company can minimize the impact of litigation on its existing operations and put forth the best defense. Here are five steps a company can take as part of this planning process, upon being notified of an existing lawsuit.

1. Contact employment counsel.
A lawyer who has experience in employment law and class actions should be contacted as soon as possible. There are certain deadlines that begin to run when a lawsuit is filed, and any delay could adversely affect the company’s defense. If the company does not know of an employment lawyer, a good start is to reach out to trusted advisors for recommendations, such as the company’s corporate lawyer or accountant. Wage and hour litigation, especially in California, is very unique, and it is recommended that the company utilize a lawyer that has experience in this area.

2. Obtain arbitration agreement (if any) signed by plaintiff, and plaintiff’s personnel file and time records.
If the company has implemented an arbitration agreement, it will be important to determine if the plaintiff has signed it, and if it bars the plaintiff from bringing a class and representative action. If there is a binding arbitration agreement in place, a motion to compel arbitration will likely be one of the first motions filed with the court.

In addition, the personnel file for the named plaintiff will need to be produced at some point in the case, and it should be provided to counsel as soon as possible.  Also, the information in the personnel file will document any performance issues or other possible defenses the company has against the plaintiff’s allegations.

3. Review allegations with counsel to see if the safe harbor provision of the Private Attorney General Act (PAGA) could apply.
With the advice of counsel, there should be a review of both the allegations in the complaint, and if the plaintiff is seeking damages under PAGA, also the PAGA notice sent to the Labor Workforce & Development Agency (“LWDA”). PAGA provides the employer a short window of time (33 days from receiving the PAGA notice) to “cure” any alleged violations. If the employer cures the problems within the time period, the plaintiff cannot recover penalties under PAGA. Whether or not any items need to be cured, and the process for utilizing this safe harbor, should be reviewed closely with counsel.

4. Begin constructing a list of all employees who have worked in similar positions as the plaintiff during the last four years (which is likely the statute of limitations).
In California, the statute of limitations for most wage and hour class actions is four years from the date the complaint is filed. Therefore, the employees who have worked in the same or similar positions as the plaintiff will likely be the group of employees the plaintiff is seeking to represent in the class action. It is important to know how many of these employees there are. For example, if there are too few this could be a defense to class certification.

5. Gather employee handbooks and policies that were in effect during the last four years.
The litigation will likely revolve around what policies the company had in place, and whether the policies were legally compliant. The company’s counsel will have to review these policies and handbooks.

How to conduct a termination is not covered in management class, or any class for that reason.  Yet the termination process is one of the more common business decisions that will receive the most scrutiny and is likely the most legally challenged decisions in the workplace.  In addition, terminations trigger immediate legal obligations that the company must be ready to deal with on a moment’s notice.  Just as companies focus on the hiring process to ensure the best employees are hired, the same attention needs to be given to the termination process to reduce potential liability.

1. Do not sugar coat the reasons for termination.

Document performance as you see it.  If the termination was for cause – document that it is for cause – don’t take the easy route out and say that the employee was laid off.  It is important to document any for cause termination (i.e. for poor performance, theft, etc.…) in order to defend against potential litigation.  A company does not want to be in the position of initially providing the reason for termination as a layoff, but then if litigation is initiated attempting to explain that the true reason was for the employee’s poor performance.  This will appear as if the company is changing the reason for the termination, and will affect the company’s credibility regarding why the employee was terminated.

2. Respect the employee during the termination process.

I do not have anything scientific here, but I’m a true believer in good bedside manner.  Most employees might not like the termination, but probably will understand the decision if they have been given proper performance reviews leading up to a termination and were treated with respect during the process.

3. If offering severance, obtain a release of claims from the employee.

If a company pays severance to the employee, it should obtain a release in exchange for the payment.  A release can be a simple document, sometimes a page or two, if there is not any anticipated litigation.  While offering an employee some severance pay may cost the company money in the short-term, but doing so could save a lot of time and money in the long run.  If done properly, an employee’s acceptance of a severance agreement waives any and all claims against the company.  Employers should be careful to consult legal counsel as what terms can be included in severance agreements.

For example, beginning January 1, 2020, employer may not include a no re-hire provision in the severance agreement.  AB 749 prohibits and invalidates any provisions in settlement agreements entered into on or after January 1, 2020 that prevent workers from obtaining future employment with the settling employer or its affiliated companies.  More information about AB 749 can be read in my prior post here.

4. Documentation.

  • Keep payroll and time records for at least four years on a rolling basis (statute of limitations for many wage claims can extend back four years).
  • Keep personnel files for at least three years after termination.  Employers are required to keep personnel files for three years under the law, but it may be advisable to retain the files longer in order to be able to defend other claims with longer statutes of limitations, such as wage claims than can extend back four years.
  • Document paid sick leave and keep these records for at least one year, or longer.  As you may recall under California’s paid sick leave requirements effective in 2015, if an employee leaves employment and is rehired by the employer within one year, previously accrued and unused paid sick days must be reinstated.  The employee is entitled to the previously accrued and unused paid sick days in addition to accruing paid sick days upon rehiring.
  • If litigation is expected, employers should ensure documents and files are retained and kept safe until the litigation is resolved.

5. Develop a checklist to follow for your company.

I believe in checklists in order to avoid missing simple items during a termination and reducing liability.  Also, the process of thinking through the steps of a termination is helpful to do when there is no pressure, and time can be taken to ensure that all aspects are addressed.  A checklist is also helpful for organizations to ensure their managers are following all of the legal and organizational requirements of a termination.  For some of my considerations to start developing a checklist, see my prior post here.

With new legal requirements facing California employers by January 1, 2020, this Friday’s Five focuses on five initial steps that employers can begin implementing now:

1. Minimum Wage and Exempt Employees Salary Threshold: Adjust pay levels for increasing minimum wage and ensure exempt employees are paid minimum threshold salaries to qualify as exempt.

  • Effective January 1, 2020, the California minimum wage for employers with 25 employees or less will be $12.00/hour, and for employers with 26 employees or more will be $13.00/hour. Employers should be mindful that higher rates may be in effect in cities (such as San Francisco) or counties (such as Los Angeles) that have enacted their own minimum wage rates, and employers must comply with the highest applicable minimum wage.
  • To qualify as an exempt employee, the employee must be paid a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. With the state minimum wage increases on January 1, 2020, large employers (with 26 or more employees) must pay a salary of at least $54,080 annually, and small employers (25 or less employees) must pay a salary of at least $49,920 per year.

2. Lactation Accommodation: Implement policies and ensure space is available to provide lactation accommodations.

SB 142 requires employers to provide additional lactation accommodations for employees.  Employers need to review if any structural changes that must made in order to comply with the new requirements, and they should also develop and implement a lactation policy that meets the requirements under the new law.  In addition, employers should train managers to understand the employer’s obligations to provide these lactation accommodations and ensure managers understand employees are entitled to breaks to express breast milk.  Reasonable amounts of time in excess of the normal meal and rest breaks must be permitted.

3. Update arbitration agreements to ensure they comply with California law.

AB 51 prohibits employers from requiring any applicant for employment or any employee to waive any right, forum, or procedure under the California Fair Employment and Housing Act (FEHA) or the Labor Code as a condition of employment, continued employment, or the receipt of any employment-related benefit. Therefore, employers must update any agreements to ensure they are voluntary to comply with AB 51.  Employers should also review the agreements to make sure they comply with California law, and continually work with counsel to ensure they are compliant.  For example, in Davis v. TWC Dealer Group, Inc., (10/30/19) the California appellate court found the employer’s arbitration agreement unenforceable on grounds that it was both procedurally (unequal bargaining power) and substantively (overly harsh or one-sided) unconscionable.

4. Severance Agreements and No-Rehire Provisions: Update severance agreements to comply with new prohibition on no-rehire provisions.

AB 749 prohibits and invalidates any provisions in settlement agreements entered into on or after January 1, 2020 that prevent workers from obtaining future employment with the settling employer or its affiliated companies.  More information about AB 749 can be read in my prior post.

5. Update handbooks and posters.

As a reminder, my firm will be hosting a seminar on the new employment legal developments for 2020 on November 21, 2019.  More information can be found here.

Fires are again affecting California and Los Angeles.  As of this morning, October 25, 2019, 50,000 people have been evacuated in northern Los Angeles County due to the Tick fire.  Given the evacuations and electrical grid shutdowns by Pacific Gas & Electric to prevent power lines from starting fires, employers need to understand their obligations regarding pay and leave issues during times of natural disasters.

1. Reporting time pay obligations

California law requires an employer to pay “reporting time pay” under the applicable Wage Order.  This requires that when an employee is required to report for work and does report, but is not put to work or is furnished less than half of the employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours, nor more than four (4) hours, at the employee’s regular rate of pay, which cannot not be less than the minimum wage.

In addition, if an employee is required to report to work a second time in any one workday and is furnished less than two hours of work on the second reporting, he or she must be paid for two hours at his or her regular rate of pay.

California’s Labor Commissioner provides the following example:

[I]f an employee is scheduled to report to work for an eight-hour shift and only works for one hour, the employer is nonetheless obligated to pay the employee four hours of pay at his or her regular rate of pay (one for the hour worked, and three as reporting time pay). Only the one-hour actually worked, however, counts as actual hours worked.

Employers must remember, when an employee is scheduled to work, the minimum two-hour pay requirement applies only if the employee is furnished work for less than half the scheduled time.

2. Exceptions to the reporting time requirements – “Acts of God”

The Wage Orders provide that employers are not required to pay overtime pay during the following circumstances:

  1. When operations cannot begin or continue due to threats to employees or property, or when civil authorities recommend that work not begin or continue; or
  2. When public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities or sewer system; or
  3. When the interruption of work is caused by an Act of God or other cause not within the employer’s control, for example, an earthquake.

3. Time paid as reporting time pay does not trigger overtime pay

Reporting time pay for hours in excess of the actual hours worked is not counted as hours worked for purposes of determining overtime.

4. What if the employee voluntarily leaves work early?

Employers are not required to pay reporting time pay if the employee voluntarily leaves work early.  For example, if the employee must leave to tend to their property during a fire, becomes sick, or must attend to personal issues outside of work and leaves early, then the employer is not obligated to pay reporting time pay (however, this may trigger paid sick leave or other legal obligations for the employer).

5. Must an employer pay an employee to attend to safety issues, such as an evacuation of their home?

Generally, there is no legal obligation for employers to pay employees if the business is shut down because of an Act of God (see above), or if an employee needs time off because of an evacuation order or to protect their property.

However, if the employee is an exempt employee, generally, they must be paid their full weekly salary if they perform any work during the week.  There are some limited exceptions to this, but employers must approach this issue with caution.  Exempt employees must be paid their salary, and generally the only exception to this is if they perform no work for the entire workweek, and the reduction in pay for the week does not bring them under the salary threshold.

As for hourly, non-exempt employees, employers may permit employees to take any PTO or accrued vacation during times of disasters.  If the employee is sick or must attend to a family member who is sick as a result of the disaster, this time off would also likely trigger paid sick leave under state or local law.